Tuesday, January 26, 2016

I don't understand economics

I am no businessman. All of the options in financial markets are beyond my understanding. If it wasn't for people who do understand those things, I would not have much money in my retirement fund. So, with that out of the way, and my qualifications fully shown to be worthless, I'll tell you how ridiculous I find the recent drops in the US stock market and people warning of dire things in our future.

Oil prices are dropping and the Chinese economy appears to be stagnating. So, our stock market is dropping. This does not make sense to me. If oil is cheap, except for those unfortunate people who work in that business, it's good for the rest of us. It is cheaper to drive our cars. Car sales are up. It is cheaper to heat our homes. Energy prices in general are dropping. This is a good thing! Out stock market should be climbing because a major expense for most businesses and homeowners is dropping.

The Chinese are a big competitor to our country's businesses. People have lamented the fact that US manufacturing jobs are being lost because the Chinese are building things cheaper there. Now, those plants are struggling and we have the opportunity (if we take it) to move those manufacturing jobs here. Also, the Chinese have been very aggressive (in a business way) of selling their goods to developing countries and they have been investing in those countries. Now that is harder for them and it gives our businesses an opening into those markets. This is a good thing! Our stock market should be climbing.

"Ah," but people say. "If the Chinese economy falters, it means less demand for our goods and services." Well, how many things have we ever been able to sell to China? They are closed to our imports and make it very hard for our businesses to get a start there. They demand all kinds of things from businesses that want to invest in China. In our country, governments tend to give businesses big breaks to move their area (just recently, General Electric decided to move its headquarters to Boston because of big tax breaks and other concessions from the state and city). We're not losing much. This is just another great opportunity for US businesses. If they still want to go to China, the conditions should favor them over the demands the government there wants to make.

But as I said at the start of this post - I don't know anything about this. But to me, it's a chance for people to whine and for other people to take advantage of us in the stock market. To me, this is all just a big diversion by the people with power in the monetary markets.

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